Thursday, December 6, 2001
Lawyers Dispute Whether ‘Chase’ Trading Cards Involve Children in Gambling, Amount to Racketeering
By a MetNews Staff Writer
Lawyers for the trading card industry and the parents of some its young customers faced off in the Ninth U.S. Circuit Court of Appeals yesterday over what one side calls good marketing and the other racketeering.
At issue in Dumas v. Fleer/Skybox International, 00-56266, is the parents’ claim that the insertion of “chase” cards into sealed packages encourages children to gamble, violates state and federal anti-gambling laws, and opens the industry to liability under the Racketeer Influenced and Corrupt Organizations Act.
Yesterday’s argument involved eight of at least 18 suits now pending around the country seeking to recover damages allegedly caused by the sale of packs containing chase or insert cards. Other suits have been filed in various jurisdictions since 1996—chase card marketing became popular about eight years ago—but apparently none have succeeded.
Seven of the suits—all heard by U.S. District Judge Rudi Brewster of the Southern District of California— involve sports cards, and the eighth involves the card game Pokémon.
Chase cards generally depict highly popular players or game pieces and are printed in limited quantities and randomly inserted in sealed packages. Trading cards are normally printed as full sheets of cardstock containing every card of a particular set or series before being cut and sorted, so that each card has an equal chance of showing up in a particular pack.
The chase card can usually be resold for many times the cost of the pack that it came in, which the plaintiffs say makes buying the cards an illegal game of chance. The odds of obtaining the special cards—or “insertion rates” as the industry prefers to call them—are routinely advertised on the packages and in promotional literature.
Defendants in the cases include all of the major trading card manufacturers, the licensing arms of professional baseball, football, basketball and ice hockey, and the players’ unions for those sports. The plaintiffs allege that the leagues, teams, and players assist the illegal operation by accepting royalties for the use of their names, likenesses, and logos.
Brewster agreed with the plaintiffs that the marketing technique is illegal, at least in New York and California, where most of the sales alleged in the complaints took place. But he held that since the buyer receives cards having some value, along with the psychological benefits of going through the pack searching for the chase card, there is no injury to the buyer’s “business or property” and thus no RICO violation.
That conclusion was disputed by the parents’ attorneys, Eric Isaacson of Milberg Weiss Bershad Hynes & Lerach in San Diego and Henry Mossbacher of Mossbacher & Associates in Los Angeles.
There is a loss of property, Isaacson argued, when someone has gained your money illegally and gets to keep it. His clients, he told the panel, are the victims of a “pattern and practice of illegal gambling preying upon children.”
Rossbacher noted that in both New York and California, the state has established an official lottery and has declared all other lotteries to be illegal. The marketing of limited-availability cards with posted odds, he argued, is “a lottery that is not authorized by …state law.”
That drew a skeptical response from Senior Judge Edward Leavy. “Why doesn’t your argument make every door prize a RICO violation?” he asked.
Rossbacher responded that door prizes are usually given by charitable organizations under immunities granted by state law. Otherwise, he told the judges, giving away the prize is illegal and may be a predicate act under RICO.
He cited cases, prior to the adoption of RICO, in which movie theater operators were found to be in violation of anti-gambling laws as a result of conducting random-number prize drawings limited to their patrons.
Such drawings, Rossbacher added, are distinguishable from product sweepstakes, which are normally permitted by state laws requiring that alternative means of entry be provided so that it is not necessary to purchase the product in order to enter.
In response to another hypothetical, offered by Judge William Fletcher, the attorney said that lucky-number giveaways at professional baseball games may violate RICO. “Congress wanted to stamp out gambling…illegal under state law,” Rossbacher said.
Shepard Goldfein of Skaden, Arps, Slate, Meagher & Flom’s New York office, who represents the sports leagues, argued that the defendants were entitled to judgment on any of three grounds—that chase-card marketing doesn’t violate gambling laws, that the plaintiffs didn’t suffer RICO injury, or that the defendants have no liability to the plaintiffs because they didn’t sell them trading cards.
Congressional intent in including gambling violations as predicate crimes under RICO, Goldfein told the judges, was to suppress “rigged” gaming.
In response to a question by Judge Thomas Nelson, Goldfein said there could be no RICO violation when the purchaser is receiving a product and gets the benefit of his bargain. Purchasing packs looking for the insert cards, he argued, is no different than what he did as a child.
He bought lots of different packs, he explained, and then went tearing through them looking for the card depicting his favorite player. “I wanted a Mickey Mantle card,” he said.
Judge William Fletcher expressed some frustration.
Having collected cards the same way Goldfein did, he said, he didn’t think that a crime was being committed. But Congress clearly intended to make the operators of illegal casino games and the like subject to RICO liability, he added.
“How does one distinguish?” he asked. Goldfein responded that RICO should be reserved for types of gambling where the patron cannot “rely on the honesty and integrity of the game.”
Other types of gambling may be illegal, he added, but the remedy for those isn’t a RICO suit.
Isaacson argued in rebuttal that chase-card marketing is very different from the way cards were sold when Goldfein and Fletcher were young. “There was no secondary market” in which they could resell the most desirable cards, the attorney noted.
If the cases go to trial, he told the judges, the plaintiffs are prepared to show how much times have changed by presenting evidence that the buying and reselling of chase cards leads to habitual gambling. “People are being addicted…It is a completely different scenario.”
Copyright 2001, Metropolitan News Company